Tuesday, February 26, 2013

Value Delivery Modeling Language (VDML): An Update

VDML (Value Delivery Modeling Language) is a business
modeling language.It supports business analysis,
design, and transformation with a focus on optimization of both customer value
and business operations from an enterprise perspective. Modeling of the creation and exchange of value
is a distinguishing feature of VDML.VDML provides an abstract representation of the design of the enterprise
that is meaningful to managers and executives, and it provides a basis for
collaboration on challenges and opportunities.

A VDML model includes measurements of operating variables
and value contributions.These
measurements are the basis for assessing the effectiveness of the business
operation.Changes to the design or operating
measurements will be propagated to changes in the measurements that describe overall
performance and customer satisfaction.

VDML is under development as an OMG (Object Management Group) standard.In late 2010 and early
2011, I did a series of blog posts on VDML starting with Value
Chain Modeling Part 1: Capability Analysis.Since that
time, we engaged additional experts, incorporated additional perspectives from
a number of business modeling techniques, added graphical notation and refined
the earlier metamodel specification.

In this post, I will provide a brief overview of the VDML principal
concepts and their relationships based on the latest draft specification. In
subsequent posts I will discuss some of our current work as we move toward
adoption of the proposed OMG specification later this year.

The fundamental, structural concept of a VDML model is
collaboration. A collaboration is
defined as a group of participants, working together for a shared purpose.An enterprise involves many, networked
collaborations including collaborations with customers and suppliers.Roles within a collaboration define how each
of the participants contribute to the collaboration.A participant can be an actor (person or
automaton), a supporting collaboration or another role.For example, a manager (role) of an
organization (collaboration) can be assigned as a member (role) of a task force
(collaboration).

There are four specialized types of collaboration in VDML:
an organization unit, a business network, a community and a capability
method.These are described in the
following paragraphs.

An organization unit,
such as a department, a team, a division or a corporation, is a collaboration
that is relatively stable with associated resources including people,
facilities and intellectual capital. The roles in an organization unit may be
filled by people and/or other organization units thus representing an
organization hierarchy.There are
typically organizational relationships in an enterprise that do not fit the
conventional organization hierarchy pattern such as project teams, interest
groups and committees.VDML provides for
the representation of all organizational relationships.

An organization unit typically has defined capabilities
based on its purpose, resources, facilities and intellectual capital. The
activities required for an organization unit to apply a specific capability can
be modeled with a capability method,
discussed below.

A business network
is a collaboration among economically independent business entities.This may represent customer relationships and
relationships with suppliers or other business partners.Business networks focus on the exchange of
products, services, money and related values such as product quality and
availability of field support.In a
viable business network, participants exchange values where each participant receives
values that, in its context, has greater
economic value than the values it provides.

A community is a
loose association of members such as a professional association, an industry
standards group, a market segment or employees with a common interest who share
ideas. In a business network, a typical customer may be represented as a member
of a market segment community.

A business capability
is the ability to perform a certain kind of work.A capability
method is a collaboration with defined roles and activities for applying a
business capability to deliver a particular result.An organization unit may have a general capability,
but it typically delivers more specific capabilities using its resources,
facilities and intellectual capital in particular ways.Its capability methods define patterns of activities
and resources required to apply the more specific capabilities.

Activity networks

Within any collaboration, activities can define what the
participants do in their roles.Activities receive business items and add value to change or produce
business items as deliverables.Stores
represent inventories of business items pending consumption by activities or
delivery to another recipient.Business
items can include resources, intermediate products, sales orders, money, specifications,
intellectual property or anything that is an input or deliverable of an
activity that is relevant to the value contribution.Most deliverables are received by activities
or stores in the same collaboration, but some are outputs to other
collaborations, including external business entities.

The dependencies based on deliverable flows between
activities and stores form an activity network
within a collaboration.An activity
network can represent any form of repetitious, organized behavior including
adaptive processes that perform some activities only part of the time.

VDML does not represent process flow-control loops or decision
branches, but focuses on the utilization of activities and the flow of
deliverables between them.Measurements of
values (for example, cost and duration) associated with activities and stores each
represent an average per unit of production, so the measurements for an
activity may reflect that it is engaged only once for some units of production,
and multiple times for other units of production.

Capabilities

VDML includes a capability taxonomy that may be represented
as a capability map.Each capability
identifies the organization units that can provide that capability.

Each activity requires a capability and identifies the role of
an assigned participant has that capability to perform the activity.The activity defines how that capability
contributes to the particular collaboration. The role of a participant may be
associated with multiple activities in the collaboration.The participant must meet the capability
requirements of each of the activities associated with that role.

A role may be filled by an actor (a person or automaton), or,
where the work of the activity requires multiple participants, it may be filled
by an organization unit with the required capability.The organization unit may identify a
capability method that defines how the capability is applied.The capability method is engaged by the
activity through delegation.Delegation is the mechanism by which a capability
method can be shared as with shared services.Delegation defines the flow of inputs of the parent activity to the capability
method and from the capability method to become deliverables of the parent activity.

Activities add value to produce deliverables.Values may be positive or negative.Values of interest typically include per-unit
cost, duration and defects, but other product-specific values may also be
captured.Each value-add contribution is
expressed with a measurement.From
contributing activities, value adds of each type are aggregated in a value proposition that represents the
values of the product or service.

A value proposition
is a package of values and deliverable(s) that are offered to a recipient,
typically a customer, but a value proposition can also be offered to other
stakeholders such as business owners or internal “customers.” The value proposition incorporates those value
contributions that are of interest to the recipient.The value proposition expresses its values
from the recipient’s perspective.For
each type of value, the aggregated measure is transformed to a level of
satisfaction based on a formula for the particular type of recipient.Different customers or market segments may be
interested in different values with different priorities, so separate value
propositions can represent the levels of satisfaction for these different
recipients.

The activities, deliverables, capabilities and values that
contribute to a value proposition are characterized as the value stream for that value proposition.Value contributions and deliverable flows
that feed the value proposition can be traced back to the activities involved
and the capabilities they use to contribute to the value proposition.

When a value proposition indicates a poor level of
satisfaction of a value, the value stream can be examined to identify the
activities and thus the capabilities that contribute to that value and the
analyst will look for potential improvements that could raise the satisfaction
level.Conversely, if a capability is
disrupted, an analyst can determine all value streams that will be affected.

VDML provides the ability to represent the same business model
under different circumstances.The
structure may be the same, but the measurements are different.We describe these different circumstances as
scenarios.So the measurements of
different product mixes might be represented with different scenarios.

In addition, a capability method might be engaged more than
once within a value stream or by multiple value streams.The measurements of the capability method
will be specific to each context.VDML
manages the measurements separately for each occurrence.

Summary

VDML provides the means to manage the complexity and competitive
forces that I outlined in Rethinking
Business for a Changing World.VDML will provide a robust modeling
capability for business architects and managers that goes beyond business
process modeling to incorporate modeling of value creation and exchange,
capabilities and capability sharing, organizational relationships and
performance measurements.Business
processes are part of the model but are represented without the flow-controls details.This will improve
understanding of the way the enterprise works, and will provide support for
strategic planning, decision-making, innovation and optimization of business
value.It provides a context for
consideration of many challenges such as capacity planning, risk management, regulatory
compliance, business transformation, new product planning, consolidation and
outsourcing.It will enable development of persistent
business models that can be used for on-going analysis and improvements rather than requiring a new,
blank-slate modeling effort for each new challenge or initiative.

At the same time, VDML will improve accountability for
customer value contributions.It will
provide information needed by first-line managers to improve their operations with
an understanding of their impact on the rest of the business and the related
organizations with whom they must collaborate and coordinate.It enables enterprise-level optimization where
many lines of business share capabilities for economies of scale and improved
enterprise agility.

Acknowledgements

Henk de Man, Director of Research at Cordys, has
been the primary co-developer of the VDML specification.In addition, a number of other industry
experts have made important contributions including Arne Berre of SINTEF, Verna
Allee of ValueNet Works, Pavel Hruby of CSC, Pet Rivett of Adaptive, Peter
Lindgren of Aalborg University, along with many others who have provided
feedback on the draft specifications.

Hi Fred,I have been following VDML with great interest. You and your team have been doing excellent work. Being more from the Value Network school of thought, the concept of intangibles specifically appeals to me. I could not help but notice its absence from this update. What role do you see it play?

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About Me

I am an independent consultant, doing business as Agile Enterprise Design, focused on business design and transformation using computer-based models and leveraging broad business experience along with knowledge of information technology. My insights and experience come from many years with EDS and HP Enterprise Services along with years of experience in development of industry standards for business modeling with the Object Management Group. I was an EDS/HP Fellow for 8 years and have now retired to engage in independent consulting.